Pending Home Sales Fall in October, but Maintain Annual Gain

While pending home sales were down slightly compared to September the National Association of Realtors® (NAR) said October was the second month in a row that its Pending Home Sales Index (PHSI) bested the previous year's numbers and called the month's activities "healthy." 

The PHSI was 104.1 in October, down 1.1 percent from the upwardly revised September level of 105.3.  The October number is 2.2 percent higher than the 101.9 posted in October 2013 and has remained above 100, considered an average level of contract activity, for six consecutive months. 

The PHSI is a forward-looking indicator based on contract signings.   The Index model has been found to parallel the level of closed existing-home sales in the following two months.

Lawrence Yun, NAR chief economist, said, "In addition to low interest rates, buyers entering the market this autumn are being lured by the increase in homes for sale and less competition from investors paying in cash.  Demand is holding steady but would be more robust if it weren't for lagging wage growth and tight credit conditions that continue to hamper those individuals looking for relief from rising rents."

The median existing-home price for all housing types in October was $208,300, which is 5.5 percent above October 2013. Monthly 2014 median price growth through October has averaged 5.8 percent after averaging 11.5 percent last year.

"The increase in median prices for existing-homes has leveled off, representing a healthier pace that has kept affordability in-check for buyers in many parts of the country while giving more previously stuck homeowners with little or no equity the ability to sell," says Yun.

Yun says evidence of rising home prices allowing more willing homeowners the ability to sell can be found in NAR's annual survey which revealed that the typical seller over the past year was in their home for 10 years before selling-an all-time survey high for tenure of home.

Yun is forecasting the final numbers for existing-home sales this year to come in at 4.9 million units, a slight drop from the 2013 total of 5.1 million units.  Sales are projected to then increase to 5.3 million in 2015 and 5.4 million in 2016. Yun expects the national median existing-home price to rise 4 percent both next year and in 2016.

The PHSI in the Northeast inched (sic) 0.5 percent to 87.9 in October, and is now 3.4 percent above a year ago. In the Midwest the index slightly declined 0.6 percent to 100.6 in October, and is now 3.0 percent below October 2013.

Pending home sales in the South decreased 1.0 percent to an index of 118.3 in October, but is still 3.9 percent above last October. The index in the West fell 3.2 percent in October to 98.1, but remains 4.1 percent above a year ago

The PHSI is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined which also coincidentally was found to be a typical year for sales.